Baystreet.ca

May 13, 2015Paratek Pharmaceuticals (PRTK)Initiation ReportLifeSci Investment Abstract
Paratek Pharmaceuticals (NasdaqGM: PRTK) is a biotechnology company developing novel Analysts
antibiotics to combat the rise of bacterial resistance. The Company's lead compound,
omadacycline, has been shown to have broad spectrum activity against a wide range
Jerry Isaacson, Ph.D. (AC)
of clinically-relevant bacteria including key drug-resistant strains. Paratek is developing
omadacycline as a treatment for acute skin and skin structure infections (ABSSSI),
community-acquired bacterial pneumonia (CABP), and also intends to pursue an indication
David Sherman, Ph.D.
for complicated urinary tract infections (cUTI) in the future. Following positive results in a
Phase II trial evaluating omadacycline in ABSSSI patients, Paratek plans to launch two Phase
III trials for the treatment of ABSSSI and CABP in the middle of 2015.Market DataKey Points of DiscussionParatek is Developing Omadacycline as a Best-in-Class Antibiotic for SeriousMarket Cap (M)Community-Acquired Infections where Resistance is a Concern. Paratek designed
omadacycline, a tetracycline derivative, with a proprietary drug discovery platform intended
Shares Outstanding (M)
to overcome the only two known mechanisms of tetracycline resistance. In vitro studies
Avg Daily Vol
demonstrated that omadacycline is active against the most common pathogens found
$16.00 - $45.96
in ABSSSI, CABP, and UTI. In a minimum inhibitory concentration (MIC) assay with
antibiotic-resistant bacteria, omadacycline was 4 to greater than 32 times more potent than
leading antibiotics against Staphylococcus aureus and 8 to greater than 32 times more potent
Annualized Cash Burn (M)
than leading therapies against Streptococcus pneumoniae.Years of Cash Left
In addition, omadacycline is 4 times more active in vitro against multidrug-resistant
Short Interest (M)Escherichia coli than leading oral antibiotics indicated for urinary tract infections. Its
Short Interest (% of Float)
broad spectrum of activity, combined with a favorable safety and tolerability profile and Financials
convenient once-daily dosing, should allow for omadacycline to become a key monotherapy
option in treating a wide range of serious community-acquired infections. Paratek has
reported positive results in a Phase II trial for ABSSSI and plans to launch two Phase III
trials in 2015, one for ABSSSI and one for CABP.Expected Upcoming Milestones
Mid-2015 – Initiate Phase III trial evaluating omadacycline for ABSSSI.
Late 2015 – Begin Phase III trial evaluating omadacycline for CABP.
Early 2016 – Commence Phase Ib trial for omadacycline in UTI.
H1 2018 – NDA filing for omadacycline in ABSSSI and CABP indications.
2018 – Commercial launch of omadacycline for ABSSSI and CABP.For analyst certification and disclosures please see page 39

 Rising Tide of Antibiotic Resistance. The introduction of antibiotics in the 1940s revolutionized the treatment of
infections and saves millions of lives worldwide annually. However, antibiotics use has applied selective pressure that has led to the emergence of antibiotic-resistant bacteria. While penicillin-resistance was rare in S. aureus bacteria when introduced in the 1940s, 70-85% of isolated bacterial cultures were found to be resistant by the 1970s. In fact, the introduction of every novel antibiotic has been followed by the emergence of clinically significant bacterial resistance.1 The CDC estimates that at least 2 million illnesses and 23,000 deaths annually in the US are the result of antibiotic-resistant bacteria. Development of new antibiotics has not kept pace with the emergence of resistance, setting the groundwork for a future public health crisis. Waning efficacy of antibiotics threatens the viability of modern medical advances like surgery, transplants, and chemotherapy.2
 Key Principles for Responding to Antibiotic Resistance. Government agencies have become increasingly aware
of this emerging public health crisis and have drawn up a coordinated national strategy to address the problem. The five stated goals outlined in the White House's National Strategy for Combating Antibiotic-Resistant Bacteria 2014 report are:
o Slow the emergence and spread of resistant bacterial strains through proper antibiotic stewardship. o Strengthen national infrastructure responsible for tracking antibiotic resistance patterns. o Develop and expand use of rapid diagnostic tests to improve treatment. o Accelerate the development of novel antibiotics. o Improve international collaboration for surveillance, research, and prevention.
The most important factor contributing to antibiotic resistance is their overuse; roughly 50% of antibiotics prescriptions are unnecessary or not optimally targeted.3 The national strategy aims to promote judicious use of antibiotics and the recognition of this drug class as a precious resource requiring preservation. In addition, the FDA has also announced new guidelines for innovative antibiotic development intended to ensure an appropriate balance between safety and efficacy in next-generation antibiotics.4,5,6
 FDA GAIN Provisions Have Incentivized New Antibiotic Development. Stringent new FDA guidelines on trial
design and concerns over return on investment have limited research and development in this space in recent years. The Generating Antibiotic Incentives Now (GAIN) provisions of the FDA Safety and Innovation Act, signed into law in 2012, incentivize the development of new antibiotics against resistant bacteria. These provisions provide 5 additional years of market exclusivity on top of existing protections for drugs that are deemed to be qualified infectious disease products (QIDP), as well as eligibility for fast track status and priority review. The net effect is to expedite the approval process for qualifying drugs and provide financial incentive for companies that undertake development in
1 Clatworthy, AE, et al., 2007. Targeting virulence: a new paradigm for antimicrobial therapy. Nature Chemical Biology, 3(9), pp541-548. 2 National Strategy for Combating Antibiotic-Resistant Bacteria. White House. 2014. 3 Antibiotic Resistance Threats in the United States, 2013. Centers for Disease Control and Prevention. http://www.cdc.gov/dru-gresistance/threat-report-2013/pdf/ar-threats-2013-508.pdf 4 Food and Drug Administration, 2013. Guidance for Industry Acute Bacterial Skin and Skin Structure Infections: Developing Drugs for Treatment. October 2013. 5 Food and Drug Administration, 2014. Guidance for Industry Community-Acquired Bacterial Pneumonia: Developing Drugs for Treatment. January 2014. 6 Food and Drug Administration, 2015. Guidance for Industry Complicated Urinary Tract Infections: Developing Drugs for Treatment. February 2015.

this space. Paratek has received QIDP status for omadacycline from the FDA, covering all three targeted indications, which could shorten the development path timeline.
 Evading Rather than trying to Overpower Bacterial Resistance. Paratek has undertaken a strategy for antibiotic
development of specifically targeting the two known mechanisms of clinically significant bacterial resistance to tetracyclines. Other companies in the space have attempted to solve bacterial resistance with increased potency, which may only be a short-term solution. In the absence of the targeted changes, such as those made by Paratek, these molecules may still be compromised by bacterial resistance mechanisms specific to each class of antibiotic. This can be seen from the shift in the minimum inhibitory concentration to kill 90% of bacterial isolates (MIC90) when resistant bacterial strains are exposed to antibiotics. Due to their potency, many antibiotics might still be effective at present, but the shift indicates that the resistance mechanisms that render these drugs ineffective are already present in the environment. Omadacycline does not exhibit a shift in MIC90 when tested against tetracycline-resistant strains from either pump efflux or ribosomal protection resistance mechanisms, demonstrating that the design of omadacycline circumvents those resistance mechanisms. In the decade that Pfizer's (NYSE: PFE) Tygacil (tigecycline), another tetracycline derivative, has been commercially available, no known novel resistance mechanisms have emerged. Thus, by addressing the only known mechanisms of resistance that exist for the tetracyclines, Paratek may have created a molecule that is less susceptible to the rapid development of bacterial resistance and has the potential to remain within the effective MIC range for quite some time.
 Omadacycline Safety Profile. To date, Paratek has studied both IV and oral formulations of omadacycline in
approximately 700 subjects and the drug has been demonstrated to be safe and well-tolerated in one Phase II, a truncated Phase III, and multiple Phase I trials. Key factors regarding the drug's safety include:
o Paratek has successfully completed a thorough QTc study demonstrating that omadacycline at super-
therapeutic doses does not prolong the QT interval.
o Omadacycline is not metabolized, and the resulting lack of metabolites could limit unintended downstream
adverse drug effects or drug-drug interactions. Gastrointestinal tolerability appeared comparable to linezolid in the Phase II and Phase III studies.
o Omadacycline's favorable safety and tolerability profile to date is promising for the community-acquired
infection space, especially considering the dose-limiting tolerability issues observed for several other tetracyclines.
 Increased Willingness to Accept Premium Pricing for Superior Antibiotics. Though they are often necessary
and potentially lifesaving drugs, antibiotics have not traditionally garnered premium pricing. The growing awareness of bacterial resistance among government agencies and the general population and the dire need for new antibiotics may be changing this sentiment. In addition, in contrast to most indications, the dwindling efficacy of many antibiotics means that the introduction of generics does not necessarily weigh on pricing for new entrants. Recent entrants to the market have pushed pricing substantially higher than in the past. Durata Therapeutics (NasdaqGM: DRTX) recently priced Dalvance (dalbavancin) at $4,500 for a 3 dose treatment regimen and Cubist/Merck (NYSE: MRK) priced Sivextro (tedizolid) at nearly $1800 for 6 days of treatment. In addition to improving the financial prospects of antibiotic development, value-based pricing also serves an important role in antibiotic stewardship by ensuring that these powerful antibiotics are used appropriately and only when necessary to combat serious infections.

 Merck's Acquisition of Cubist Highlights Excitement and Market Opportunity for Novel Antibiotics. On
January 21st, Merck closed a deal to acquire Cubist Pharmaceuticals (NasdaqGS: CBST), an antibiotics company developing novel treatments against dangerous bacteria. Merck paid $8.4 billion in cash, a 35% premium over the average share price on December 8th when the deal was announced, and assumed $1.1 billion in debt. The deal gives Merck access to Cubist's top-selling antibiotic, Cubicin (daptomycin), and highlights the growing interest among large pharmaceutical companies to enter into the market for antibiotics against resistant bacteria.
 Paratek Licensed Sarecycline Program to Actavis/Allergan. In 2007, Paratek entered into a collaboration and
licensing agreement with Warner Chilcott, now Actavis/Allergan (NYSE: ACT), for Paratek's sarecycline antibiotic program for the treatment of moderate to severe acne vulgaris. In exchange for US development and commercialization rights, Paratek received a $4 million upfront payment. Actavis/Allergan has successfully completed a Phase II trial evaluating sarecycline for the treatment of moderate to severe facial acne vulgaris and launched two Phase III trials in December 2014, triggering an additional $4 million milestone payment. Paratek is eligible for up to $17 million in potential regulatory milestone payments as well as high single digit to low double-digit tiered royalties based on net sales. The Company has retained development and commercialization rights for all non-US territories. Financial Outlook Reverse Merger and Financing. On October 30th, Paratek completed a reverse merger with Transcept Pharmaceuticals (NasdaqGM: TSPT). Prior to the merger, Paratek raised $93 million in funding and Transcept executed a 1-for-12 reverse stock split of its common stock. Transcept changed its name to Paratek Pharmaceuticals and began trading under the ticker symbol PRTK on the Nasdaq Global Market. In combination with roughly $14 million that existed on Transcept's balance sheet before the merger, the Company post-merger had approximately $107 million in cash available. In April 2015, Paratek completed a public offering for 2,860,000 shares of common stock at a purchasing price of $24.50 per share. The underwriters have been granted a 30-day option to purchase an additional 429,000 shares. After discounting for underwriting fees and commissions, the Company received $71.1 million in net proceeds. Paratek has given guidance that current cash levels are sufficient to get through to the data read out of the Phase III CABP trial in mid-2017.

Table of Contents
Analyst Certification . 39
Disclosures . 39

Company Description Paratek is a biotechnology company that is developing next-generation tetracycline-derived antibiotics to address the rising tide of drug-resistant bacteria. The Company is testing the safety and efficacy of its lead candidate, omadacycline, as a potential treatment for acute bacterial skin and skin structure infections (ABSSSI) and community-acquired bacterial pneumonia (CABP). Omadacycline was designed using the Company's proprietary drug discovery platform to generate structural modifications of minocycline to overcome the only two known, clinically significant mechanisms of bacterial resistance to tetracyclines. Paratek successfully completed a Phase II trial and conducted a truncated Phase III trial in cSSSI patients, showing that omadacycline was comparable to Pfizer's Zyvox (linezolid), and plans to pursue a Phase III trial in ABSSSI and a Phase III trial in CABP in 2015. The Company has also generated strong in vitro data showing potent activity against a wide range of key pathogens involved in ABSSSI, CABP, and UTI. These include drug resistant strains like methicillin-resistant S. aureus (MRSA), penicillin-resistant S. pneumoniae, andextended spectrum beta-lactamase positive E. coli. Paratek is also collaborating with Actavis/Allergan in the US to develop the antibiotic sarecycline as a potential treatment for moderate to severe facial acne vulgaris. Actavis/Allergan has successfully completed a Phase II trial for sarecycline in this indication and initiated two Phase III trials in December 2014. Omadacycline: Potential Best-in-Class Antibiotic Against Resistant Bacterial Strains

Omadacycline is a tetracycline derivative that Paratek designed to overcome the only two known, clinically significant mechanisms of bacterial resistance to tetracyclines using its proprietary drug discovery platform. Paratek has successfully completed a Phase II trial and conducted a truncated Phase III trial evaluating omadacycline in patients with complicated skin and skin structure infections (cSSSI). The Company plans to launch two Phase III trials in 2015; one study in community-acquired bacterial pneumonia (CABP) and one study in acute bacterial skin and skin structure infections (ABSSSI). The Company also expects to assess omadacycline as a potential treatment for urinary tract infections with a Phase I trial expected to be initiated 2016. Tetracyclines are a group of antimicrobials known for broad-spectrum activity and clinical utility against a range of bacterial infections. Although tetracyclines are considered an important frontline therapy, their overall usefulness has waned in the face of widespread bacterial resistance.7 There are only two known mechanisms of clinically significant resistance to tetracycline noted in nature since the first introduction of Aureomycin in 1945. They are pump efflux and ribosome protection mechanisms. Omadacycline was designed to overcome these resistance mechanisms with targeted molecular changes and has demonstrated activity against resistant pathogens that commonly cause ABSSSI, CABP, and UTI. Figure 1 shows the molecular structure of omadacycline, which was produced through chemical modification of minocycline.

Figure 1. Molecular Structure of Omadacycline Source: LifeSci CapitalFor tetracyclines, one goal of therapy is to maximize drug exposure. The standard measure of efficacy for this antibiotic class is the ratio of the steady-state 24 hour area under the plasma concentration curve (AUC) divided by the minimum inhibitory concentration (MIC) of the offending pathogen (AUC:MIC ratio). In humans, the omadacycline steady-state serum AUC is about 10 g-hr/ml and omadacycline has demonstrated an MIC90 of 0.25 g/ml against S. aureusand 0.125 g/ml against S. pneumoniae. The projected AUC:MIC ratios are 40 for S. aureus and 80 for S. pneumoniae. In experiments with Tygacil (tigecycline), an AUC:MIC ratio over 12.8 was shown to be sufficient to cure more than 90% of skin infections,8 and animal efficacy studies suggest an AUC:MIC ratio around 8 for omadacycline was shown to be sufficient to cure S. pneumoniae infections. The AUC:MIC ratios for omadacycline suggests a high probability of positive clinical outcomes, particularly in the ABSSSI and CABP indications. Mechanism of Action. Omadacycline, as with all members of the tetracycline family, functions as an antibiotic by binding to ribosomes within bacterial cells and inhibiting protein synthesis. Specifically, tetracyclines bind to the 30S ribosomal subunit, preventing the accommodation of aminoacyl-tRNA (aa-tRNA) into the ribosomal A site and thus halting the addition of new amino acids to a nascent peptide.9 This process is depicted in Figure 2. Resistance to tetracyclines occurs either through the emergence of tetracycline efflux or ribosome protection. With efflux, resistant cells express channels that pump out tetracycline, preventing inhibitory drug concentrations from building up in the bacteria. Ribosome protection is achieved by a protein binding to the ribosome that causes conformational changes that inhibit tetracycline binding.
8 Meagher, A, et al., 2005. A novel approach for evaluating the microbiological efficacy of tigecycline in patients with complicated skin and skin structure infections. Clinical Microbiological Infections, 11(suppl 2), pp1183, 373 9 Connell, S.R. et al., 2003. Ribosomal protection proteins and their mechanism of tetracycline resistance. Antimicrobial Agents and Chemotherapy, 47(12), pp3675-3681.

Figure 2. Role of Tetracyclines in Blocking Translation during Bacterial Protein Synthesis Source: Kaiser et al., 2014Omadacycline is derived from minocycline but has several important structural changes that may enable it to circumvent the two known resistance mechanisms, pump efflux and ribosomal protection. In vitro and in vivo studies have shown that omadacycline is effective against tetracycline resistant strains of bacteria that possess these resistance elements. In vitro studies have also shown that omadacycline has a favorable minimum inhibitory concentration (MIC) against bacteria resistant to other classes of antibiotics, which is consistent with the lack of cross-resistance to other classes of antibiotics. This may be due to the chemical and mechanistic differences between omadacycline and other tetracyclines compared to other classes of antibiotics. Safety Profile. As a class, tetracyclines have relatively few side effects and are generally well tolerated by the general population.10 Omadacycline has been tested in approximately 700 people to date in multiple clinical trials and has been shown to be generally safe and well tolerated. The most common AEs were gastrointestinal in nature, which is typical of antibiotics, although these effects were generally mild and comparable in frequency and severity to comparator antibiotic in randomized clinical trials. Preclinical studies have shown that omadacycline is not processed by the liver and does not form any metabolites which could cause downstream adverse events or unfavorable drug-drug interactions.11 Paratek has conducted a thorough QTc study to determine whether omadacycline has any adverse effects on the cardiac rhythm as measured on the electrocardiogram (ECG).12 The results showed that unlike moxifloxacin, omadacycline does not interact with cardiomyocyte hERG channels, and does not prolong the QT interval. A
10 Speer, B.S. et al., 1992. Bacterial resistance to tetracycline: mechanisms, transfer, and clinical significance. Clinical Microbiology Reviews, 5(4), pp387-399. 11 Hanna, I, et al., 2012. Metabolic stability of PTK 0796 (omadacycline). 22nd European Congress of Clinical Microbiology and Infec-tious Diseases. April 1, 2012. 12 Food and Drug Administration, 2005. E14 Clinical evaluation of QT/QTc interval prolongation and proarrhythmic potential for non-antiarrhythmic drugs.
prolonged QT interval can lead to the development of cardiac arrhythmias, and is an important safety concern for drug developers and regulatory authorities. In a truncated Phase III trial conducted in 2012, Paratek demonstrated that omadacycline has a suitable safety profile to advance into pivotal Phase III trials. In the study, there were no drug-related serious adverse events (AEs) reported for omadacycline treated patients.13 In studies conducted to date, the safety and tolerability profile of omadacycline has been found to be comparable to linezolid and consistent with that of other well-tolerated tetracycline antibiotics. These results further support the ongoing clinical development of omadacycline as a potential new antibiotic to add to the dwindling supply of treatments for serious infections. Preclinical Data. Preclinical studies have shown that omadacycline has in vitro and in vivo activity against a broad panel of clinically-relevant bacteria such as MRSA, vancomycin-resistant Enterococcus (VRE), E. faecalis, and also S. pneumoniae, including several multi-drug resistant strains.14 MRSA is resistant to the entire class of beta lactam antibiotics, which include penicillin, amoxicillin, methicillin, oxacillin, and almost all cephalosporins, and has become an important clinical challenge in the community. Figure 3 compares the in vitro efficacy of omadacycline with current antibiotics used in treating a range of clinically relevant bacteria. The figure displays the MIC90 value for each antibiotic, which is the amount of antibiotic needed to inhibit growth of 90% of the bacterial isolates. The lower the MIC90, the more potent the antibiotic. Figure 3 clearly demonstrates omadacycline's in vitro potency compared with many current antibiotics. Omadacycline is able to inhibit growth of a broad range of bacteria at much lower concentrations than many competing antibiotics. Figure 3. MIC90 Values for Omadacycline Against Clinically-Relevant Bacteria Source: Macone et al., 2014
13 Noel, G.J. et al., 2012. A randomized, evaluator-blind, phase 2 study comparing the safety and efficacy of omadacycline to those of linezolid for treatment of complicated skin and skin structure infections. Antimicrobial Agents and Chemotherapy, 56(11), pp5650-5654. 14 Macone, A.B. et al., 2014. In vitro and in vivo antibacterial activities of omadacycline, a novel aminomethycycline. Antimicro-bial Agents and Chemotherapy, 58(2), pp1127-1135.
In addition, preclinical work has demonstrated the success of Paratek's targeted modifications of the tetracycline molecule.15,16 Treatment of S. aureus bacteria expressing either tetracycline efflux or ribosome protection with increasing tetracycline concentrations led to a reduced ability to inhibit protein synthesis compared to non-resistant strains. In contrast, treating these cells with omadacycline demonstrated continued inhibition of protein synthesis indicating the ability of omadacycline to overcome resistance14. The ability of omadacycline to overcome ribosomal protection was also demonstrated biochemically in studies of isolated bacterial ribosomes with the ribosome protection protein, Tet(O). Figure 4 highlights the effect of Tet(O) resistance on in vitro protein synthesis indicating that the ability of omadacycline to inhibit bacterial protein synthesis is unaffected by ribosome protection whereas both minocycline and tetracycline are clearly compromised by Tet(O). Figure 4. In Vitro Inhibition of Protein Synthesis in Presence or Absence of Tetracycline Resistance Source: Weir et al., 2003 17Acute Bacterial Skin and Skin Structure Infections (ABSSSI)

Acute bacterial skin and skin structure infections (ABSSSI), previously known as complicated skin and skin structure infections (cSSSI), include a broad range of microbial skin and associated subcutaneous tissue infections.18 Treatment of ABSSSI is constantly changing as physicians shift to using antibiotics with activity against resistant organisms, which have grown more prevalent in recent years in both community and hospital settings.19 Causes & Pathogenesis.S. aureus is the most common cause of ABSSSI across all geographic regions globally. Resistant strains of S. aureus have emerged, including healthcare-acquired S. aureus (HA-MRSA) and community-acquired MRSA (CA-MRSA). The distinguishing feature between CA and HA forms of MRSA is that CA-MRSA involves patients without prior exposure to the healthcare system. In addition, the pathogenic bacteria that cause
15 Weir, S., et al. 2003. The Mechanisms of action of PTK 0796. 43rd Interscience Conference on Antimicrobial Agents and Chemotherapy. American Society for Microbiology, abstr 2473, poster F-751, Washington, DC. 16 Weir, S, et al., 2003. The activity of PTK 0796 against tetracycline resistance. 43rd Interscience Conference on Antimicrobial Agents and Chemotherapy. American Society for Microbiology, abstr 2611, poster F-752, Washington, DC. 17 Weir, S, et al., 2003. The activity of PTK 0796 against tetracycline resistance. 43rd Interscience Conference on Antimicrobial Agents and Chemotherapy. American Society for Microbiology, abstr 2611, poster F-752, Washington, DC. 18 Moran, G.J. et al., 2013. Acute bacterial skin infections: developments since 2005 Infectious Diseases Society of America (IDSA) guidelines. The Journal of Emergency Medicine, 44(6), ppE397-E412.19 Bassetti, M. et al., 2013. New Antibiotics for Bad Bugs: Where are we? Annals of Clinical Microbiology and Antimicrobials, 12(22).
community and hospital-acquired skin infections tend to be different strains. CA-MRSA prevalence has increased in the past decade, and is now the predominant cause of purulent ABSSSIs in the U The skin is the first line of defense against microbial invasion. ABSSSIs occur when the barrier is disrupted and allow bacteria colonizing the different layers of skin to invade. S. aureus colonizes the skin at numerous sites like the nose, underarm, and groin.20 The bacterium initiates colonization by going through an exponential growth phase that results in the production of various adhesive cell wall proteins that facilitate attachment and adherence to host tissues.21 Colonization increases the risk of infection by providing a reservoir of S. aureusWhen the skin barrier is disrupted via ulcers, burns, and surgical or traumatic wounds, this breach in the host defense provides an opportunity for colonizing bacteria to invade. Symptoms & Diagnosis. ABSSSIs are diagnosed based on clinical findings of a skin lesion that shows redness, edema, pain, and warmth. Laboratory work is used to confirm the diagnosis and identify specific bacterial etiologies. Systemic signs such as elevated heart rate, fever over 104F, altered mental status, and rapidly increasing pain could indicate more severe infection.22 Laboratory work may include blood tests, tissue swab, and wound cultures. Historically, wound cultures were performed infrequently because of predictable causes and known antibiotic susceptibility patterns. With the increasing prevalence of resistant strains, more physicians perform wound cultures in order to characterize the bacterial etiology.23 Routine diagnostic microbiology and antibiotic susceptibility testing has become part of the diagnostic regimen and currently all patients admitted to the hospital have cultures performed then are placed on empiric antibiotics. Complications. Complications from ABSSSIs can arise due to delays in seeking medical attention or resistance to prescribed antibiotics. The worsening infections can result in spread of the infection to the bloodstream, which can eventually lead to sepsis and multiple end organ failure if not treated properly and swiftly. With the rise of multi-drug resistant bacteria (MDR), fewer and fewer treatment options may lead to increased mortality, prolonged hospital stays, and elevated medical costs. ABSSSI Treatment. Patients with ABSSSI can be treated on an outpatient or inpatient basis, depending on their clinical status. Patients with mild to moderate ABSSSIs without systemic toxicity are treated on an outpatient basis with oral antibiotics. Patients with more severe infections presenting with systemic toxicity require hospitalization. When treating ABSSSI, physicians often prescribe empirically, thus giving antibiotics before the specific bacterial etiology is known based on the most likely pathogens and mechanism of injury. With the increased prevalence of CA-MRSA causing ABSSSI, empirical therapy has shifted from beta lactam and cephalosporin antibiotics to intravenous antibiotics with activity against CA-MRSA. 20 Gordon, R.J. and Lowy, F.D., 2008. Pathogenesis of methicillin-resistant Staphylococcus aureus infection. Clinical Infectious Diseases, 46(s5), s350-s359. 21 Loughman, J.A. and et al., 2009. Virulence gene expression in human community-acquired Staphylococcus aureus infection. Journal of Infectious Diseases, 199, pp294-301. 22 Dryden, M.S., 2014. Novel antibiotic treatment for skin and soft tissue infection. Current Opinion in Infectious Diseases, 27(2), pp116-124. 23 Boucher, H.W. et al., 2009. Bad bugs, no drugs: no ESKAPE! An update from the Infectious Diseases Society of America. Clinical Infectious Diseases, 48, pp1-12. Figure 5 lists current antibiotics used to treat ABSSSIs in the inpatient and outpatient setting along with their advantages and disadvantages. Depending on the clinical status and the severity of the infection, it is recommended that hospitalized patients are given vancomycin, linezolid, daptomycin, telavancin, or clindamycin along with surgical debridement and other narrow-spectrum antibiotics with activity primarily against gram positive bacteriCurrently, the recommended oral antibiotics to treat ABSSSI caused by CA-MRSA are clindamycin, trimethoprim-sulfamethoxazole (co-trimoxazole), tetracyclines like doxycycline and minocycline, and linezolid. As these are oral antibiotic agents, these are the primary options for outpatient treatment. Figure 5. Commonly Used Antibiotics in ABSSSI Treatment TreatmentFormulation
 Not specifically approved for
FDA approved for serious S.
Oral (3x/day) IV
aureus infections
 Rising resistance
 Excellent tissue penetration
 Problems with C. difficile colitis  Not FDA approved for any S. aureus infections
 Broad coverage of CA-MRSA
 Resistance is known
 Caution with use in elderly
 Allergy  Not specifically approved for
treatment of MRSA
 FDA-approved for treatment of
Doxycycline
 Resistance is known
SSSIs due to S. aureusMinocycline
 Not for pregnant women or
 FDA-approved for treatment of
 Long term use limited by
Oral (2x/day) IV
ABSSSI due to MRSA
hematologic toxicity, peripheral
(linezolid)
 100% oral bioavailability
and optic neuropathy
 Resistance is rare
 Risks for patients taking SSRIs  Renal toxicity
 Standard IV therapy against
 Allergic reactions
Vancomycin
 Slow bactericidal activity  Rising resistance  Cross resistance with vancomycin
FDA-approved for complicated
Increased creatinine
SSSIs, S. aureus bacteremia,
phosphokinase (CPK) levels
infective endocarditis
which can manifest as muscle pain and weakness
 Can cause nephrotoxicity
FDA-approved for complicated
 Risks for pregnant women
 Bactericidal against MRSA
 Problems with C. difficile colitis
Source: LifeSci Capital
In 2014, the FDA has approved 3 additional antibiotics for the treatment of ABSSSIs, including Durata Therapeutics' (NasdaqGM: DRTX) Dalvance (dalbavancin), The Medicines Company's (NasdaqGS: MDCO) Orbactiv (oritavancin), and Cubist/Merck's (NYSE: MRK) Sivextro (tedizolid). All 3 of these drugs have a narrow gram positive spectrum activity against a range of key pathogens including MRSA. It is not yet clear how these drugs will reshape the ABSSSI treatment landscape once introduced into the market in 2015. Sivextro is the only new entrant with both oral and IV formulations as well as once daily dosing. However, Sivextro is a more potent analogue of Zyvox (linezolid) and carries many of the same tolerability issues as its predecessor. The narrow spectrum of activity for Sivextro also limits Cubist/Merck from developing Sivextro for CABP or UTIs and its use has been limited to 6 days to protect against many of the safety concerns that can emerge from longer term use of the oxazolidinones. Skin Infection Market Information Epidemiology. In the United States, there are nearly 900,000 hospitalizations for ABSSSI per year, second only to pneumonia among infections leading to hospitalization.24 In a study of US emergency room patients, 60% of ABSSSI cases were the result of infection with CA-MRSA,25 although the prevalence of MRSA varies widely across geographic regions. Roughly 30% of humans are carriers of S. aureus,26 and MRSA is thought to have colonized 2% of the general population and 12% of hospital patients in the US. In 2011, the CDC found 80,000 severe cases of invasive MRSA that led to 11,000 deaths; roughly 20,000 of these infections were community-acquired.27 MRSA was once limited to hospitals and the rise of MRSA in the community setting reflects a major shift in the epidemiology of ABSSSIs. This increased MRSA prevalence has also led to a greater number of hospitalizations for ABSSSIs. Market Estimates. Antibiotic treatment lasting longer than 10 days was necessary in 80% of ABSSSI cases, which is a driver of the soaring healthcare costs associated with ABSSSIsThe average total cost of a hospitalization to treat an ABSSSI was $9,388 in 2011.28 When a MRSA infection is community acquired, the typical cost of treating a skin infection ranges from $7,000-$20,000.29 The treatment of ABSSSIs is concentrated within the healthcare system, with the top 500 hospitals covering an estimated 40% of cases and 1,900 hospitals covering roughly 80% of cases. The total MRSA therapeutics market worldwide was estimated to be $2.7 billion in 2011 and is expected to grow to $3.5 billion by 2019. The CDC estimates that the total economic costs of bacterial resistance are as much as $35 billion per yeaNovel antibiotics that overcome bacterial resistance can substantially reduce this considerable economic burden and should be eligible for premium pricing. Branded antibiotics currently used to treat ABSSSI are Cubist/Merck's (NYSE: MRK) Cubicin (daptomycin), Pfizer's (NYSE: PFE) Tygacil (tigecycline), Pfizer's Zyvox (linezolid), and Actavis/Allergan's (NYSE: ACT) Teflaro (ceftaroline).
24 Jenkins, T.C. et al., 2014. Antibiotic prescribing practices in a multicenter cohort of patients hospitalized for acute bacterial skin and skin structure infection. Infection Control and Hospital Epidemiology, 35(10), pp1241-1250. 25 Moran, GJ, et al., 2006. Methicillin-resistant S. aureus infections among patients in the emergency department. New England Journal of Medicine, 355, pp666-674. 26 Gorwitz RJ, et al., 2008. Changes in the prevalence of nasal colonization with Staphylococcus aureus in the United States, 2001–2004. Journal of Infectious Disease, 19:7, pp1226-1234. 27 Antibiotic resistance threats in the United States, 2013. Centers for Disease Control and Prevention. 28 Khachtryan, A, et al., 2014. Rising US Hospital Admissions for Gram+ Acute Bacterial Skin and Skin Structure Infections (ABSSSI). Society for Hospital Medicine, March 24-27, 2014. 29 Lee, B.Y. et al., 2013. The economic burden of community-associated methicillin-resistant Staphylococcus aureus (CA-MRSA). Clinical Microbiology and Infection, 19(6), pp528-536.
Vancomycin is a widely used and well-known antibiotic whose sales command 70% of the market based on days of therapy, although the introduction of generic forms has substantially reduced revenue generated from vancomycin sales. In addition, a recent judicial ruling invalidated two key patents on Cubicin, which will allow market entry of generics as early as 2016. Figure 6 shows the last three years of sales for the main branded antibiotics used to treat ABSSSIs. Given evolving resistance patterns and safety concerns, the antibiotic market is dynamic and innovative treatments are welcomed. Given the 900,000 patients hospitalized for ABSSSIs each year, the market for omadacycline as a frontline monotherapy could easily exceed $1 billion annually. Premium value-based pricing relative to competing antibiotics may be possible for a drug with a cleaner safety profile than existing therapies. Figure 6. Worldwide Sales in Billions for Branded ABSSSI Antibiotics Antibiotic Cubicin (daptomycin) Tygacil (tigecycline) Zyvox (linezolid) Teflaro (ceftaroline)
Actavis/Allergan
Source: LifeSci Capital Clinical Program Paratek is developing oral and IV formulations of omadacycline to treat ABSSSI and CABP. Following initial Phase I development, the Company successfully completed a Phase II trial in ABSSSI and a truncated Phase III trial in ABSSSI. The Company expects to launch a Phase III trial in ABSSSI in mid-2015 and to launch a Phase III trial in CABP in late 2015. Paratek plans to submit an NDA for the treatment of ABSSSI and CABP indications in early 2018 with potential commercial launch expected as early as 2018. Phase I Trials

Paratek conducted several Phase I trials to investigate the safety, tolerability, and pharmacokinetics of omadacycline in healthy volunteers. The drug was generally safe and wel -tolerated across all trials and the pharmacokinetic data was used to determine a therapeutic dose and establish bioequivalence between IV and oral doses.30 In addition, no serious adverse events related to omadacycline were reported nor were there any subjects leaving the studies due to treatment-emergent adverse events. Intravenous Dose-Finding Trial. A total of 55 volunteers were enrolled in this randomized, placebo controlled, double-blind trial. 41 subjects received omadacycline and 14 were given placebo. The study evaluated increasing 25, 50, 100, 200, 300, 400, and 600 mg doses of intravenous omadacycline in a 3x3 dose escalation design. Each dosing
30 Ting, L. et al., 2010. Pharmacokinetics of intravenous and oral PTK796, a new aminomethylcycline antibiotic [k-124]. In: 50th Interscience Conference on Antimicrobial Agents and Chemotherapy, Boston, A1-022.
groups contained 5-6 subjects. Plasma concentrations of omadacycline were quantified with liquid chromatography-mass spectrometry (LC-MS) using a threshold of 20 ng/mL. Trial Results. Omadacycline was found to be safe and well-tolerated. Injection site reactions were the most commonly reported AE, affecting 22% of subjects in the omadacycline group compared with 7% on placebo. There were 5 subjects from the highest dose groups who experienced clinically significant elevations of alanine transaminase (ALT) values that were considered drug-related. These values declined to normal levels by the end of the study. Terminal elimination half-life was approximately 18 hours, which supports once-daily dosing. Omadacycline pharmacokinetics were dose-proportional over the range of IV doses tested in this study. It is worth noting that nausea and vomiting were not dose limiting. Single IV and Oral Dose Trial. This randomized, double-blind, placebo-controlled Phase I study assessed the safety, tolerability, and pharmacokinetics of a single IV and a single oral dose of omadacycline in healthy volunteers. In the study, 24 subjects received omadacycline and 8 subjects received placebo. Plasma concentrations of omadacycline were quantified with liquid chromatography-mass spectrometry (LC-MS/MS) using a threshold of 20 ng/mL.

Trial Results. In this trial, omadacycline was considered safe and well-tolerated and only 4 patients experienced adverse events (AE) with only one deemed to be drug-related by the investigators. No one experienced any serious AEs and no subject discontinued due to AEs. The investigators found that female subjects have a statistically significant 20% higher drug exposure following a single intravenous injection. Crossover Trial. This Phase I study used a crossover design to establish the bioequivalence of intravenous and oral doses of omadacycline and was divided into two parts. In part A, 40 patients were randomized to either receive 250 mg or 300 mg of oral omadacycline; part A also included a placebo group of 2 patients. Part B was a randomized, placebo controlled crossover study with 16 patients receiving either 100 mg of IV omadacycline, 300 mg of oral omadacycline, or placebo. Plasma concentrations of omadacycline were quantified with liquid chromatography-mass spectrometry (LC-MS/MS) using a threshold of 20 ng/mL.

Trial Results. Regarding safety, there were no serious adverse events (AE), nor any volunteers leaving the study due to AEs. Nausea was the most common AE following oral administration, but not with IV omadacycline. Omadacycline was absorbed intravenously in 0.75 hours and via oral administration in 1.94 hours. Oral bioavailability was estimated to be about 33%, based on median AUCinf calculations.31 The study highlighted that the IV and oral doses of omadacycline are bioequivalent, thus demonstrating the ability to step down from IV to oral treatment, or potentially use only the oral option. Phase II Trial

Paratek conducted a Phase II trial investigating the safety and efficacy of omadacycline versus Zyvox (linezolid) in treating ABSSSIs. The study enrolled patients who had one of four categories of ABSSSI, including wound infection, major abscess, infected ulcers in the lower extremity, or cellulitis.
31 Sun, H, et al., 2012. A single-dose study to evaluate the pharmacokinetics, safety, and tolerability of multiple formulations of PTK 0796 in healthy subjects. Interscience Conference on Antimicrobial Agents and Chemotherapy. September 11, 2012.
Trial Design. Patients were randomized to receive either 100 mg of IV omadacycline every 24 hours or 600 mg of IV linezolid every 12 hours before transitioning to oral therapy. Patients receiving omadacycline also received an intravenous placebo to match the linezolid twice-daily dosing schedule. 111 patients were assigned to treatment with omadacycline and 108 to the linezolid arm. Patients were transitioned to oral therapy based on a clinician's judgment. When transitioning to oral therapy, omadacycline-treated patients took two 100 mg tablets once daily, while linezolid-treated patients took 600 mg twice a day. Patients may have been aware of their study drug assignment due to the appearance and number of tablets. Because of this, patients were instructed not to share any information with the investigators. The primary endpoint of the study was the clinical response rate at the end of IV treatment, end of antibiotics, and test of cure (TOC) 10 to 17 days after the end of treatment. Clinical response was determined with a clinical assessment by a blinded evaluator to determine if the infection was sufficiently resolved so as not to require treatment with new antibiotics. Trial Results. While the study was not statistically powered to compare treatments, omadacycline-treated patients experienced a numerically comparable clinical response rate to that found in patients in the linezolid arm.32 For major abscesses, which were the most common type of infection in the study, omadacycline treatment resulted in a successful clinical response rate of 89.7% compare with 78.3% in the linezolid group. Omadacycline treated patients with wound infections experienced 100% clinical response compared to an 83.3% response rate for linezolid. For all clinically-evaluable patients omadacycline resulted in a 98.0% clinical response rate compared to 93.2% for linezolid. Bacterial isolates were taken from all patients and were then evaluated in vitro to quantify their susceptibility to antibiotics. Most of the isolates were either S. aureus, MSSA, or MRSA. Figure 7 displays the MIC90 values obtained for omadacycline and linezolid treated isolates from both treatment groups. Substantially lower concentrations of omadacycline were needed to inhibit bacterial growth relative to linezolid.

32 Noel, G.J. et al., 2012. A randomized, evaluator-blind, Phase II study comparing the safety and efficacy of omadacycline to those of linezolid for treatment of complicated skin and skin structure infections. Antimicrobial Agents and Chemotherapy, 56(11), pp5650-5654.
Figure 7. Susceptibility of Bacterial Isolates to Omadacycline and Linezolid
S. aureus treated w/
S. aureus treated w/
Antibiotic Used to Test Susceptibility: Omadacycline
Source: Macone et al., 2010 33
Out of the 111 patients in the omadacycline group, 46 experienced treatment-emergent AEs and 24 experienced treatment-related AEs. In the linezolid group, 55 out of 108 linezolid-treated patients experienced treatment-emergent AEs and 33 experienced treatment-related AEs. Omadacycline was not associated with any drug-related serious adverse events (SAE). Two patients from the linezolid group left the study due to SAEs of heartburn and pruritic rash, but these events were not determined to be drug-related. The most common AEs were gastrointestinal in nature, with nausea being the most frequently reported. The results showed that omadacycline in daily doses of 100 mg intravenously or 200 mg orally was comparable to linezolid in safety and tolerability. This Phase II study indicated that omadacycline is comparable to linezolid in safety and tolerability and appears to be effective in treating ABSSSI. The study determined that omadacycline can be administered once daily with either IV or oral formulations and is active against MRSA. These positive clinical results support Paratek's ongoing clinical development program for omadacycline. Phase III Trial Paratek plans to launch a Phase III trial to evaluate omadacycline in patients with ABSSSIs based on updated FDA guidelines for the design and development of antibiotics. The FDA has conducted a Special Protocol Assessment (SPA) and has agreed to the Phase III study design for omadacycline. Paratek has announced plans to commence enrollment in the study for ABSSSI in mid-2015.
33 Macone, AB, et al., 2010. Identification and Susceptibility of Pathogens Isolated from Patients with Complicated Skin and Skin Structure Infections (cSSSI): Results of a PTK796 (PTK) Phase 2 Clinical Trial. 50th Interscience Conference on Antimicrobial Agents and Chem-otherapy. September 13, 2010.
Trial Design. The randomized, double-blind, active controlled, non-inferiority Phase III trial will compare omadacycline to linezolid in 650 ABSSSI patients. The study will consist of an initial period of intravenous treatment followed by oral treatment. Treatment duration will be from 7 to a maximum of 14 days. The trial design is consistent with updated FDA and EMA guidelines on ABSSSI trials that were released in 2013.34 Paratek will measure early clinical response 2-3 days after initiating treatment to satisfy FDA requirements for ABSSSI clinical trials and will also measure clinical response at a post therapy evaluation 7 to 14 days after treatment to satisfy EMA guidelines. The Company expects begin enrollment in mid-2015 and complete the trial in late of 2016. Community-Acquired Bacterial Pneumonia Pneumonia is a bacterial, viral, or other infection of the lung that leads to inflammation of the alveolar tissue.35,36 Roughly 5.6 million cases of infectious pneumonia occur annually in the United States, resulting in more than 1 million hospitalizationsPneumonia treatment is guided by a joint effort led by the Infectious Diseases Society of America (IDSA) and the American Thoracic Society (ATS) based on guidelines released in 2007.37 The increased prevalence of pneumonia caused by drug-resistant strains has complicated the treatment landscape. Categorization of Pneumonia. There are several categories of pneumonia that are defined according to the manner in which infection was acquired:
 Hospital-Acquired Pneumonia (HAP) – A patient who was admitted without infection and has been in
the hospital for at least two days has a first positive bacterial culture.
 VAP (Ventilator-Acquired Pneumonia) – A subtype of HAP, this type of pneumonia occurs when a patient
has received mechanical ventilation for at least 24 hours prior to first positive bacterial culture.
 HCAP (Healthcare-Acquired Pneumonia) – This category includes patients from the community who
have had frequent contact with the healthcare system prior to diagnosis. Hospitalizations within the last 90 days, residence in a nursing home, or outpatient intravenous therapies are risk factors associated with HCAP.
 CAP (Community-Acquired Pneumonia) – CAP describes patients who acquired pneumonia from normal
social contact in the community absent interaction with the healthcare system.
Causes & Pathogenesis. Although patients are routinely tested, the microbial cause of CABP is identified in only about 60% of cases.38 The most common bacterial pathogens associated with CABP are Streptococcus pneumoniae, Haemophilus influenzae, Chlamydophila pneumoniae, and Mycoplasma pneumoniae. S. pneumoniae is the most commonly isolated pathogen in both inpatient and outpatient cases of community-acquired pneumonia, and drug resistant S. pneumoniae(DRSP) has complicated the management of CABP. The Community-Acquired Pneumonia Organization (CAPO) study identified this bacterial strain in 36% of all hospitalized patients where a full microbiological workup was 34 Food and Drug Administration, 2013. Guidance for Industry Acute Bacterial Skin and Skin Structure Infections: Developing Drugs for Treatment. October 2013. 35 Anevlavis, S and Bouros, D, 2010. Community-Acquired Bacterial Pneumonia. Expert Opinions in Pharmacotherapy, 11(3), pp361-374. 36 Musher, DM and Thorner, AR, 2014. Community-Acquired Pneumonia. New England Journal of Medicine, 371, pp1619-1628. 37 Mandell, LA, et al., 2007. Infectious Diseases Society of America/American Thoracic Society Consensus Guidelines on the Management of Community-Acquired Pneumonia in Adults. Clinical Infectious Diseases, 44supp2, pp27-72. 38 Sanz Herrero, F, et al., 2012. Microbiology and risk factors for community-acquired pneumonia. Seminars in Respiratory and Critical Care Medicine, 33, pp220-231.
performed.39 Methicillin-resistant S. aureus (MRSA) is a less common cause of CABP than S. pneumoniae, although cases involving this pathogen tend to be more virulent, potentially life-threatening, and more difficult to treat. Community-acquired bacterial pneumonia (CABP) commonly begins with inhalation of infectious particles. Once inhaled, pneumonia develops when the bacteria are able to evade mucous defenses and migrate into the alveoli.40 Fluid accumulates in the alveolar space, which can affect lung capacity and dampen breathing. Bacterial infection can also co-occur with viral pneumonia which can complicate the diagnostic and treatment process. Symptoms & Diagnosis. The most common symptoms of CABP are malaise, cough, fever, shortness of breath, sputum production, and chest pain.41 Pneumonia is usually suspected based on a physical examination that includes a physician listening to a patient's lungs for sounds of crackling, bubbling, wheezing, or rumbling. Measurements of oxygen saturation via pulse oximetry and arterial blood gases via arterial blood draws are also recommended, especially for patients with underlying cardiac and pulmonary conditions.42 Along with clinical signs and symptoms, a pneumonia diagnosis is confirmed with a chest x-ray that very often shows signs of a lung infiltrate, which is the filling of airspaces with fluid, inflammatory exudates, or cells. If further characterization is necessary, computer tomography (CT) scans can assist in detecting smaller infiltrates not seen on x-ray.43 Common tests for pneumonia include complete blood count (CBC) for white blood cell count, two sets of blood cultures, sputum Gram stain and culture, and urine antigensAlthough helpful in identifying a pathogen, these tests are unreliable and only produce culture isolates of S. pneumoniae in 40-50% of cases. However, this test may produce valuable prognostic information, so current guidelines recommend two sets of blood cultures for hospitalized patients for CABP. Risk-Factor Stratification. There are two major predictive models to help categorize pneumonia severity and the associated risk of death within 30 days of diagnosis, the Pneumonia Severity Index (PSI) and the CURB65 scale.44 The PSI index divides patients into five classes of disease severity, with class I to III indicating low risk, IV indicating intermediate risk, and V indicating high risk. The index takes into account factors like age, coexisting illnesses, and a variety of other physical, laboratory, demographic, and radiographic findings. Patients with scores in risk class I and II are usually candidates for outpatient treatment, while patients in risk class IV and V are most often hospitalized. Risk class III is an intermediate case that requires a judgment call on the part of the clinician.
39 Wiemken, TL, et al., 2012. Global changes in the epidemiology of community-acquired pneumonia. Seminars in Respiratory and Critical Care Medicine, 33(3), pp213-219. 40 Henriques-Normark, B. and Tuomanen, EI, 2013. The pneumococcus: epidemiology, microbiology, and pathogenesis. Cold Spring Harbor Perspectives in Medicine, 3s(7). 41 Lutfiyya, MN et al., 2006. Diagnosis and treatment of community-acquired pneumonia. American Family Physician. 73(3), pp442-450. 42 Alfageme, I et al., 2005. Guidelines for the diagnosis and treatment of community-acquired pneumonia. Archivos de Bron-coneumologia, 41(5), pp272-289. 43 Katz, DS and Leung, AN, 1999. Radiology of pneumonia. Clinics in Chest Medicine, 20, pp549-562. 44 Fine, MJ et al., 1997. A prediction rule to identify low-risk patients with community-acquired pneumonia. New England Journal of Medicine, 336(4), pp243-250.
The CURB65 scoring system is simpler and takes into account only five variables: confusion, blood urea nitrogen (BUN), respiratory rate, blood pressure, and age. Each factor that makes up CURB-65 is assigned zero or one point based on specific cut-offs. CURB-65 is easier than the PSI to use in a primary care setting where blood testing and radiography may not be immediately available.45 A CURB-65 score of 0 or 1 is considered low risk and the physician may consider outpatient treatment. A score of 3 or more is considered high risk and the patient must be hospitalized, with consideration given to possible transfer to the intensive care unit if necessary. Treatment. Treatment for CABP is directed towards broad antimicrobial therapy against both typical and atypical pathogens. Outpatients who have no recent history of antibiotic use or coexisting illnesses are generally prescribed a macrolide, such as azithromycin, clarithromycin, or erythromycin, or a tetracycline such as doxycycline. Outpatients with recent antibiotic use, coexisting illnesses, or other risk factors for drug resistant pathogens are usually given fluoroquinolones such as moxifloxacin, gemifloxacin, or levofloxacin. CABP patients requiring hospital admission initially receive intravenous antibiotics, often in combination, and are transitioned to a course of oral antibiotics for a total of 14 days of combined therapy. Exact treatment regimens may vary according to the specific history and needs of the patient. The emergence of DRSP has complicated the treatment of CABP cases, and 30% of severe S. pneumoniae cases result from bacteria that are fully resistant to one or more commonly used antibiotics.46 In cases of CABP with suspected CA-MRSA, vancomycin or Zyvox (linezolid) are often preferred due to the strong anti-MRSA activity of these drugs. With the increasing threat of DRSP and MRSA as causes of CABP, alternative broad spectrum antibiotics are necessary in order to cover these resistant strains.The FDA has recently approved two antibiotics for the treatment of severe cases of CABP, Pfizer's Tygacil (tigecycline) and Actavis/Allergan's Teflaro (ceftaroline). Although Tygacil (tigecycline) was shown to be non-inferior to levofloxacin in clinical trials, an increased rate of gastrointestinal adverse events has hampered its use. Teflaro is indicated for treatment of CABP caused by S. pneumoniae and methicillin-susceptible S. aureus (MSSA), but there is no clinical data supporting its use in pneumonia caused by penicillin-resistant Streptococcus pneumoniae (PRSP) or MRSA. CABP Market Information Epidemiology. Every year in the United States, 5.6 million CABP cases are diagnosed and over 1 million require hospitalization.47 CABP is responsible for 50,000 estimated deaths per year in the US alone.48 Pneumonia is a leading cause of death and the most common cause of infection-related mortality. Presently, the 30-day case fatality rate is 8.5% and 3.8% for inpatient and outpatient CABP, respectively.49 The fatality rate can rise to as high as 10% when the pneumonia is caused by certain types of multi-drug resistant (MDR) pathogens such as drug-resistant S. pneumoniae
45 Ebell, MH, 2006. Outpatient vs. inpatient treatment of community-acquired pneumonia. Family Practice Management, 13(4), pp41-44. 46 Antibiotic resistance threats in the United States, 2013. Centers for Disease Control and Prevention. 47 Anevlavis, S and Bouros, D, 2010. Community-Acquired Bacterial Pneumonia. Expert Opinions in Pharmacotherapy, 11(3), pp361-374. 48 Watkins, R.R. and Lemonovich, T.L., 2011. Diagnosis and management of community-acquired pneumonia in adults. Ameri-can Family Physician, 83, pp1299-1306. 49 Yu, H, et al., 2012. Clinical and Economic Burden of Community-Acquired Pneumonia in the Medicare Fee-for-Service Pop-ulation. Journal of the American Geriatrics Society, 60(11), pp2137-2143.
(DRSP) or methicillin-resistant S. aureus (MRSA).50 The CDC estimates that approximately 1.2 million cases of drug-resistant S. pneumoniae infections, including pneumonia infections, occur each year leading to 7,000 deaths. Although MRSA is a less common cause of pneumonia than S. pneumoniae, cases involving this pathogen tend to be more virulent and more difficult to treat. One study reported a 30-day mortality rate as high as 20% for CABP caused by MRSA.51,52 Market Estimates. Pneumonia bears a substantial cost on the healthcare system and society. Additionally, the rise of resistant bacteria has substantially added to this burden. The mean cost for treating a CABP patient is $8,606 overall, reflecting costs of $18,670 and $2,394 for inpatient and outpatient treatments, respectively.53 CABP primarily affects children less than 5 years of age and people over 65 years of age, but can also affect working age adults leading to lost productivity costs.54 Overall, the economic burden of community-acquired pneumonia is estimated to be over $17 billion annually, most of which is spent on hospital care.55 The economic burden in the US of drug-resistant S. pneumoniae alone is estimated to be $90 million in direct medical costs and $230 million in total. Beta lactams, macrolides, and fluoroquinolones make up the bulk of the market especially for susceptible strains causing CABP. However, there is unmet need for antibiotics targeting resistant strains like DRSP and CA-MRSA, which cause more severe CABP and complicate treatment. Patients infected with MDR organisms can require more than double the hospital stay as patients infected with non-MDR pathogens,56 and one study suggested that one in seven non-intensive care unit (non-ICU) CABP patients experience failure of initial antibiotic therapy.57 Premium pricing relative to competing antibiotics may even be possible for a drug with a cleaner safety profile than existing therapies. Most of the frequently prescribed antibiotics for CABP are no longer patent protected. Figure 8 highlights the commercially available branded drugs that are utilized to treat CABP as well as other serious bacterial infections. Tygacilhas serious tolerability issues and carries a boxed warning from the FDA on an increased risk of death, which has hampered adoption. Teflaro's commercial launch has been slow, although this is typical of newly-introduced intravenous antibiotics.

Paratek plans to launch a pivotal Phase III trial to evaluate omadacycline as a treatment for CABP. The Company has a Special Protocol Assessment (SPA) in place with the FDA on the trial design and plans to begin patient enrollment in late 2015. Trial Design. The randomized, double-blind, active comparator controlled Phase III trial is expected to compare omadacycline to moxifloxacin in 750 CABP patients. The study will consist of an initial period of intravenous treatment followed by once-daily oral treatment. Treatment will last from 7 days to a maximum of 14 days. This trial design is in line with FDA and EMA guidelines on antibiotic trials for CABP.58 The trial will utilize two primary endpoints as Paratek will measure early responses 3-5 days after initiating treatment to satisfy FDA requirements for CABP clinical trials and will also measure clinical response at the post therapy evaluation (PTE) 5-10 days after completion of therapy. The endpoints in the study are intended to satisfy both FDA and EMA requirements. Patients will be randomized 1:1 to receive omadacycline or moxifloxacin treatment. The Company expects to complete enrollment for the trial in first half of 2017. Other Treatments in Development There are a number of antibiotics in development for the treatment of ABSSSI and CABP to replace existing therapies whose efficacy has waned in the face of rising bacterial resistance. While many of these antibiotics have demonstrated efficacy against clinically-relevant pathogens, issues of safety, flexibility, and dosing convenience will shape their adoption if approved. Figure 9 highlights the most important late-stage drugs in development for the treatment of ABSSSI and CABP. Cempra's (NasdaqGS: CEMP) solithromycin and Melinta's (private) delafloxacin are two antibiotics that are currently under evaluation in Phase III trials in CABP and ABSSSI, respectively. Actavis/Furiex's avarofloxacin, and Nabriva Therapeutics' (private) lefamulin are Phase III-ready assets that have already undergone testing in Phase II trials.
58 Food and Drug Administration, 2014. Guidance for Industry Community-Acquired Bacterial Pneumonia: Developing Drugs for Treatment. January 2014.
Figure 9. Treatments in Development for ABSSSI and/or CABP Formulation Frequency Indication Lefamulin Source: LifeSci Capital Solithromycin – Cempra (NasdaqGS: CEMP). Solithromycin is a fourth-generation macrolide currently in development for the CABP indication. Solithromycin has several structural modifications from previous macrolides that are expected to have increased its microbial activity, metabolic stability, and tolerability. In particular, Cempra appears to have eliminated any effect on QT interval that is commonplace in the macrolide family. Cempra has demonstrated solithromycin's activity against some but not all macrolide-resistant bacterial strains. In 2013, solithromycin was granted QIDP and Fast Track designation from the FDA. In Phase II, solithromycin was shown to have comparable efficacy to levofloxacin with a possibly cleaner safety profile.59,60 No patients discontinued the study due to treatment-emergent adverse events in the solithromycin-treated group, compared to 6 patients in the levofloxacin group. Cempra initiated two Phase III trials, SOLITAIRE-Oral in December 2012 and SOLIAIRE-IV in December 2013, to evaluate solithromycin in CABP patients.61,62 Cempra completed the enrollment of 860 CABP patients in the SOLITAIRE-Oral trial in September 2014 and announced positive topline data in the first quarter of 2015. The study demonstrated that solithromycin was non-inferior to moxifloxacin within the stipulated 10% margin. Solithromycin had a 78.2% early clinical response rate at 72 hours, which was the primary efficacy endpoint, compared with a 77.9% early response rate for moxifloxacin. Cempra is expected to provide additional guidance in the second quarter of 2015 on the expected timeline for the completion of enrollment for the SOLITAIRE-IV trial. The SOLITAIRE-IV trial employs an IV-to-oral design to demonstrate the dosing flexibility of solithromycin for this dosing regimen. Since this is an important facet of transitioning from inpatient to outpatient therapy, several companies in the space such as Paratek have already shown IV and oral dosing flexibility in Phase II development. In addition, Cempra's pursuit of a single indication, CABP, limits the economic potential of solithromycin compared to other drugs that can be prescribed across several indications. This decision is based on solithromycin's weak activity
59 https://clinicaltrials.gov/show/NCT01168713 60 Oldach, D. et al., 2013. Randomized, double-blind, multicenter phase 2 study comparing the efficacy and safety of oral soli-thromycin (CEM-101) to those of oral levofloxacin in the treatment of patients with community-acquired bacterial pneumonia. Antimicrobial Agents and Chemotherapy, 57(6), pp2526-2534. 61 https://clinicaltrials.gov/show/NCT01756339 62 https://clinicaltrials.gov/show/NCT01968733
against MRSA bacteria, which is a common cause of ABSSSIs, and lack of activity against E. coli which is a common cause of UTIs. Delafloxacin – Melinta (Private). Delafloxacin is a next-generation fluoroquinolone antibiotic that was originally licensed from Wakunaga Pharma in 2006 and has received QIDP designation from the FDA. This antibiotic was designed with a proprietary drug discovery platform intended to reduce the risk of future bacterial resistance. Delafloxacin is under development for the treatment of ABSSSI, and its safety, tolerability, and efficacy have been demonstrated in 4 Phase II clinical trials.63 In May 2013, Melinta initiated a randomized, double-blind, placebo controlled PROCEED Phase III study to compare the efficacy of IV delafloxacin to a combination of IV vancomycin and aztreonam for treating ABSSSI patients.64 This study has been completed and Melinta reported topline data in January 2015, finding that the study hit its primary endpoint. Melinta has also launched a second Phase III trial in September 2014 assessing an IV-to-oral regimen of delafloxacin in comparison to the IV combination of vancomycin and aztreonam.65 This trial is estimated to be completed in the third quarter of 2015. Melinta may also pursue hospital-acquired pneumonia and complicated UTI indications, although clinical development has not begun for either of these indications. Delafloxacin use has a modest association with gastrointestinal problems, including nausea, vomiting, and diarrhea. In the most recent Phase III trial, nausea, diarrhea, and vomiting affected 22%, 15%, and 13% of patients, respectively. Avarofloxacin (JNJ-Q2) – Actavis/Furiex (NYSE: ACT; NasdaqGS: FURX). Avarofloxacin is a Phase III-ready, novel fluoroquinolone antibiotic in development as a potential treatment for ABSSSI and CABP that has received both QIDP and Fast Track designation from the FDA. Furiex Pharmaceuticals licensed avarofloxacin from Johnson & Johnson (NYSE: JNJ) in 2009, and the company was recently acquired by Actavis/Allergan (NYSE: ACT) in September 2014. Avarofloxacin, which has been formulated for IV and oral use, has broad-spectrum activity against clinically-relevant bacterial strains for both ABSSSI and CABP, including MRSA and other resistant strains. Furiex demonstrated the non-inferiority of avarofloxacin compared to Zyvox (linezolid) in treating ABSSSI in a Phase II trial, as measured by the clinical test of cure rate.66 Furiex also generated positive results in a small Phase II trial comparing avarofloxacin to moxifloxacin in treating severe CABP, although the sample size was too small to statistically test for non-inferiority.67 The drug is considered ready for Phase III development in both indications, although Actavis/Allergan has not outlined its plans for timing of its next steps. Both avarofloxacin and omadacycline have been evaluated in Phase II trials for ABSSSI that utilized Zyvox as a comparator. Treatment with avarofloxacin led to a clinical response rate of 83.1% in the intent-to-treat (ITT) patient population, compared to an 82.1% response rate following Zyvox treatment. The comparable response rate measure in Paratek's Phase II trial revealed an 88.3% response rate for patients treated with omadacycline, in contrast to the 75.9% response rate with Zyvox. Similar to delafloxacin, avarofloxacin, is being developed for twice daily dosing.
63 Bassetti, M, et al., 2015. Delafloxacin for the treatment of respiratory and skin infections. Expert Opinion on Investigational Drugs, 24(3), pp433-442. 64 https://clinicaltrials.gov/show/NCT01811732 65 https://clinicaltrials.gov/show/NCT01984684 66 Covington, PS, et al., 2013. A Phase 2 study of the novel fluoroquinolone JNJ-Q2 in community-acquired bacterial pneumonia. Journal of Antimicrobial Chemotherapy, 68(11), pp2691-2693. 67 Covington, PS, et al., 2011. Randomized, Double-Blind, Phase II, Multicenter Study Evaluating the Safety/Tolerability and Efficacy of JNJ-Q2, a Novel Fluoroquinolone, Compared with Linezolid for Treatment of Acute Bacterial Skin and Skin Structure Infection. Antimicrobial Agents and Chemotherapy, 55(12), pp5790-5797.
Lefamulin (BC 3781) – Nabriva (Private). Lefamulin is a Phase III-ready antibiotic with QIDP and Fast Track designation from the FDA that is being developed as a potential treatment for CABP. Nabriva was developing lefamulin under a collaborative agreement with Forest Labs; however, in July 2013, Forest Labs decided not to exercise its option to acquire Nabriva and the collaboration ended. Nabriva is now seeking a partner to help finance Phase III development. The Company has demonstrated that lefamulin has comparable efficacy to vancomycin in a Phase IIb trial with a possibly improved safety profile. In addition, Nabriva recently presented data showing good penetration of the drug into epithelial lining fluid, which supports lefamulin's potential use for respiratory tract infections.68 In a Phase II trial for ABSSSIs, Nabriva demonstrated that lefamulin treatment had a clinical success rate among clinically-evaluable patients of 90.0% with the 100 mg dose and 88.9% with the 150 mg dose.69 This was slightly lower than the 92.2% response rate in patients treated with vancomycin. Lefamulin had an 85.3% response rate against infections caused by MRSA. Lefamulin is dosed twice daily. Competitive Landscape

Need for Broad Spectrum Activity Against ABSSSI and CABP Pathogens. Antibiotics are often administered empirically in the ABSSSI and CABP indications, necessitating that a monotherapy be active against a wide range of pathogens. Although many antibiotics possess broad-spectrum activity upon introduction, efficacy can wane as selective pressure leads to the emergence of resistant strains of bacteria. The introduction of every novel antibiotic has been followed, sometimes in a short period of time, by the emergence of clinically-significant bacterial resistance.70 Many recent antibiotic development programs have focused on a specific subset of pathogens, which has restricted their empiric utility to certain indications. Antibiotic candidates targeting gram positive bacteria have been most useful in treating ABSSSI, while those targeting gram negative strains have been limited to use in UTI, cIAI, HAP, and VAP. Omadacycline has potent activity against a range of clinically-relevant gram positive and gram negative bacteria including resistant strains and atypical bacteria. Its targeted design may be associated with a slow rate at which resistance emerges, given the absence of known, de novomechanisms of tetracycline resistance in nature today. Dosing Convenience and Treatment Flexibility Will Broaden Use. Many currently available treatments and drugs in development require dosing 2 or 3 times per day, which can be inconvenient and reduce patient compliance. Of the drugs in development, delafloxacin, avarofloxacin, and lefamulin are likely to be dosed twice daily. Eravacycline, a glycylcycline antibiotic, is also likely to be developed as a twice daily oral treatment. Many other agents are only available as IV formulations, which either prolongs inpatient duration and thus the overall treatment cost or necessitates switching drugs for outpatient use which carries risks of reduced efficacy, cross-resistance, and side effects.
68 Sader, H.S. et al., 2012. Antimicrobial activity of the novel pleuromutilin antibiotic BC-3781 against organisms responsible for community-acquired respiratory tract infections (CARTIs). Journal of Antimicrobial Chemotherapy, 67, pp1170-1175. 69 Prince, WT, et al., 2013. Phase II Clinical Study of BC-3781, a Pleuromutilin Antibiotic, in Treatment of Patients with Acute Bacterial Skin and Skin Structure Infections. Antimicrobial Agents and Chemotherapy, 57(5), pp2087-2094. 70 Clatworthy, AE, et al., 2007. Targeting virulence: a new paradigm for antimicrobial therapy. Nature Chemical Biology, 3(9), pp541-548.
Omadacycline is bioavailable through oral and IV formulations and its pharmacokinetic profile allows for once daily dosing, which is convenient for the patient and allows for seamless transitions from inpatient to outpatient therapy. Aside from omadacycline, solithromycin, being developed for CABP, is the only other antibiotic in late stage development with once daily dosing for both oral and IV formulations. Search for a Better Safety Profile. Safety and tolerability issues exist with many of the antibiotics used to treat ABSSSIs and CABP. Vancomycin can cause renal toxicity and allergic reactions in some people. Zyvox carries risks of optic and hematologic toxicities, limiting its use to short durations of time. Individuals taking selective serotonin reuptake inhibitors (SSRIs) or monoamine oxidase inhibitors (MAOIs) cannot take Zyvox due to the potential to induce a life-threatening condition known as serotonin syndrome. Tygacil, a recently approved antibiotic, causes high rates of gastrointestinal problems and contains a boxed warning about an increased mortality rate. Several other classes of broad-spectrum antibiotics, such as beta-lactams and quinolones, can cause gastrointestinal problems including C. difficile infections that can be difficult to treat. In cases of severe bacterial infections, the side effect profiles of these drugs are often accepted as a necessary evil in exchange for successful treatment of the infection. An alternative antibiotic with a cleaner safety profile than currently exists on the market would rapidly gain market share. Dearth of New Antibiotics Reaching Approval. Development of new antibiotics has not kept pace with the rise of bacterial resistance, creating a dire need for therapies that are effective against resistant pathogens. Resistance hinders the treatment of even basic bacterial infections and with dwindling numbers of effective antibiotics, the viability of modern medical procedures such as surgery, transplants, and chemotherapy could be compromised. The implications are well known within the hospital setting since resistance and multi-drug resistance have been known for decades. The situation is now occurring in the community setting, potentially creating situations where instead of taking home an oral antibiotic prescription, one must undergo hospitalization and continued intravenous antibiotic therapy until the infection is completely cured. Figure 10 shows the number of submitted antibiotic NDAs that received approval between 1980 and 2012, underscoring the slowdown in antibiotic development in recent years. Stringent FDA regulations on trial design and diminished return on investment have discouraged companies from entering this space.71 However, omadacycline's demonstrated broad spectrum activity in multiple infectious disease indications, unlike many of the drugs under development, may greatly improve the economic outlook and likely return on investment for the drug.
71 Spellberg, B, 2012. New Antibiotic Development: Barriers and Opportunities in 2012. Alliance for the Prudent Use of Antibiotics Clinical Newsletter, 30(1), p2.
Figure 10. Number of Approved Antibiotic NDAs 1980-2012
1980-1984 1985-1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012 2013-2014
Source: Centers for Disease Control and PreventionReshaped Market may Accept Premium Pricing. Although antibiotics have not traditionally garnered premium pricing, the growing threat of bacterial resistance and emerging need for new antibiotics has changed many people's thinking. Recent entrants to the market have pushed pricing substantially higher than in the past. Durata Therapeutics recently priced Dalvance (dalbavancin) at $4,500 for a 3 dose treatment regimen and Cubist/Merck priced Sivextro(tedizolid) at $1800 for 6 days of treatment. This is made possible by the waning efficacy of generic antibiotics which do not exert pricing pressure on new entrants into the market. In addition to improving the financial prospects of antibiotic development, premium pricing also serves an important role in antibiotic stewardship by ensuring that these powerful antibiotics are used appropriately when necessary to combat serious infections. Urinary Tract Infections

Urinary tract infections (UTIs) are bacterial infections of the urinary tract and are one of the most common conditions for which patients are prescribed antibiotics.72 UTIs are fairly common in the general population with nearly 50% of women having at least one UTI in their lifetime. UTIs have a high recurrence rate with about 25% of women experiencing a second episode within 6 months of their first UTI.73 UTIs are categorized into uncomplicated and complicated UTIs (cUTI). Uncomplicated UTIs are usually diagnosed in healthy premenopausal women with normal functioning urinary tracts. cUTIs are found in patients with structural or functional abnormalities in their urinary tract who may possess other underlying risk factors such as antibiotic-resistant organisms, comorbid illnesses, or recurrent UTIs. Rising bacterial resistance has confounded the treatment of UTIs necessitating the development of additional
72 Mazzulli, T., 2012. Diagnosis and management of simple and complicated urinary tract infections (UTIs). The Canadian Journal of Urology, 19(s1), pp42-48. 73 Foxman, B., 2003. Epidemiology of urinary tract infections: incidence, morbidity, and economic costs. Disease-a-Month, 49(2), pp53-70.
effective antibiotics. In a Phase I study, Paratek found high levels of omadacycline in the urine, indicating that it may be an effective front-line therapy in the treatment of UTIs. Causes & Pathogenesis. The pathogen responsible for nearly all UTIs is uropathogenic Escherichia coli (UPEC), which is isolated in greater than 75% of casesomplicated UTIs (cUTIs) have more varied, less predictable bacterial etiologies, although UPEC is still found in roughly 50% of cases. Pathogens responsible for cUTIs, including MRSA, methicillin-resistant coagulase-negative staphylococci (MRCoNS), vancomycin-resistant enterococci (VRE), and bacteria producing extended spectrum beta lactamases (ESBLs), tend to be more resistant to current antibiotic therapies.74 The most common route of infection is for UPEC to enter the urethra and ascend into the bladder. After infection, UPEC can migrate into deeper urothelial layers and proliferate intracellularly in clusters, eventually forming biofilms that serve as intracellular bacterial reservoirs capable of persisting despite the body's immune response.75,76

Symptoms & Diagnosis. cUTIs are found in patients with structural or functional abnormalities in their urinary tract or other underlying factors such as antibiotic-resistant organisms, comorbid illnesses, or recurrent UTIs. Other factors that are associated with cUTIs are being male, elderly, immunocompromised, or receiving a urinary catheterization. To diagnose either an uncomplicated or complicated UTI, a clinician must perform a history and a physical examination and send samples for urinalysis. Acute symptoms consist of urinary frequency, pain or burning on urination, urgency, or foul smelling or cloudy urine. More severe UTIs that involve the upper urinary tract can present additionally with patient discomfort, flank pain, and fever from pyelonephritis or kidney infection. Although urine cultures are not always performed with uncomplicated UTIs, they are mandatory when a cUTI is suspected. The presence of certain biomarkers such as nitrites and leukocyte esterase in the urine are indicators of UTIs. If the infection is suspected to have spread to the kidneys, urine cultures are then recommended. Urine cultures are also recommended for patients whose symptoms do not resolve or recur 2-4 weeks after treatment. Computed tomography (CT) or ultrasound scans are usually performed to rule out correctable, anatomical causes of cUTIs. If UTIs are left untreated or are treated inadequately, patients can develop complications such as recurrent infections, renal failure, or sepsis.77 Treatment. IDSA recommends co-trimoxazole twice daily for three days as the first line treatment for uncomplicated UTIs in premenopausal women.78 Alternatives to co-trimoxazole include nitrofurantoin, amoxicillin-clavulanic acid, cephalosporin, fosfomycin, ofloxacin, and ciprofloxacin. Unfortunately, bacteria have exhibited increasing resistance against these first- and second-line antibiotics. Beta-lactam antibiotics are no longer recommended as a first-line therapy because E. coli resistance rates now exceed 20%.79 Fluoroquinolones have lower resistance rates of about 10%, but these resistance rates have been trending upward and can vary widely.
74 Pallett, A. and Hand, K., 2010. Complicated urinary tract infections: practical solutions for the treatment of multiresistant Gram-negative bacteria. Journal of Antimicrobial Chemotherapy, 65(s3), iii25-33. 75 Anderson, GG, et al., 2003. Intracellular bacterial biofilm-like pods in urinary tract infections. Science, 301(5629), pp105-107. 76 Eto, DS, et al., 2006. Actin-gated intracellular growth and resurgence of uropathogenic Escherichia coli. Cell Microbiology, 8(4), pp704-717. 77 Nicolle, L.E., 2005. Complicated urinary tract infections in adults. The Canadian Journal of Infectious Disease and Medical Microbiology, 16(6), pp349-360. 78 Mazzulli, T., 2012. Diagnosis and management of simple and complicated urinary tract infections (UTIs). The Canadian Journal of Urology, 19(s1), pp42-48. 79 Colgan, R. and Williams, M., 2011. Diagnosis and treatment of acute uncomplicated cystitis. American Family Physician, 84(7), pp771-776.
Treatment for cUTIs is not as clearly defined. Currently, recommendations for first-line antibiotics in treating cUTIs are IV therapy with a fluoroquinolone, a carbapenem, a third generation cephalosporin, or piperacillin-tazobactam. Resistance to co-trimoxazole is seen in most cases of cUTIs so it is not recommended. For patients with sepsis most likely caused by ESBL-producing bacteria, imipenem or meropenem are recommended.80 In recent years, the efficacy of cephalosporins and piperacillin-tazobactam has decreased due to rising resistance, leaving few treatment options when resistant pathogens are present. The FDA has approved three antibiotics specifically for cUTIs, all of which are intravenous, Johnson & Johnson's Doribax (doripenem) in 2007, Cubist/Merck's Zerbaxa (ceftolozane/tazobactam) in 2014, and Actavis/AstraZeneca's Avycaz (ceftazidime/avivactam) in 2015. Although Doribax is resistant to extended spectrum beta-lactamases, it is susceptible to carbapenemases. This drug also carries a low risk of seizures, which is common to the carbapenem family, and increases the risk of C. difficile infections. Zerbaxa carries a warning of reduced effectiveness in patients with kidney impairment, which may limit its use in the most severe cUTI cases. Actavis/Allergan has demonstrated that Avycaz is non-inferior to Doribax, although its three times daily dosing and IV-only formulation may limit its broad use. UTI Market Information Nearly 50% of all women report experiencing at least one UTI in their lifetime, making UTIs the most common bacterial infection in womeThere are approximately 7 million and 0.9 million uncomplicated and complicated UTI cases each year.81,82 Quality of life is affected and daily activity is interrupted, with the patient missing work or school due to UTIs. The economic burden resulting from cUTIs is augmented by the lack of effective therapies to combat the rising tide of bacterial resistance. About 15% of all community-prescribed antibiotics in the US are dispensed for UTIs, which is estimated to total over $1 billion annually. Direct and indirect costs due to UTIs total $1.6 billion annually. Demand for a novel oral antibiotic may be high enough to drive peak sales in excess of $1 billion. Competitive Landscape

Rising Antibiotic Resistance Complicates UTI Treatment. Resistant bacteria have complicated the treatment landscape for UTIs. Due to the co-expression of resistance mechanisms, these bacteria may be resistant to beta lactam and non-beta lactam antibiotics like fluoroquinolones, trimethoprim, and gentamicin. Increasing resistance has led clinicians to rely on older drugs that are less effective and often carry greater safety risks. Alternative options are limited highlighting the need for next generation treatments for cUTIs. Pressing Need for Oral Therapies. There are no oral antibiotics for UTIs that have maintained efficacy against resistant uropathogenic bacteria responsible for cUTIs. Current treatment requires the use of intravenous drugs, which
80 Pallett, A. and Hand, K., 2010. Complicated urinary tract infections: practical solutions for the treatment of multiresistant Gram-negative bacteria. Journal of Antimicrobial Chemotherapy, 65(s3), iii25-33. 81 Foxman, B., 2003. Epidemiology of urinary tract infections: incidence, morbidity, and economic costs. Disease-a-Month, 49(2), pp53-70. 82 Ferri, C, et al., 2005. Prevalence and clinical management of complicated urinary tract infections in Italy: a prospective multi-center epidemiological study in urological outpatients. Journal of Chemotherapy, 17(6), pp601-606.
necessitates hospital visits and can drive up the total cost of treatment. The vast majority of physicians recognize the need for an oral antibiotic solution to this problem and an effective oral antibiotic that does not sacrifice efficacy would likely be widely used. Multi-drug resistance and new mechanisms of resistance are limiting therapeutic choices. In many cases, the threat of resistance has impacted antibiotic stewardship efforts within hospitals by increasing the use of the most important intravenous antibiotics that should be reserved for very serious infections. Other cUTI Treatments in Development There are several antibiotics for the treatment of cUTIs that are currently in development, shown in Figure 11. Actavis/Allergan's Avycaz (ceftazidime/avibactam) is the most advanced with two pivotal Phase III trials completed and its NDA submitted in September 2014. Tetraphase recently announced positive data from its Phase III trial evaluating eravacycline as a treatment for intra-abdominal infections, which bodes well for the likelihood of success of its ongoing Phase III trial for eravacycline in cUTI patients. Merck is developing relebactam as well and plans to launch a Phase III trial in 2015. Figure 11. Treatments in Development for cUTIs Formulation Dose Frequency
Phase Ib planned
QID daily for 4 days
Source: LifeSci Capital Eravacycline (TP 434) – Tetraphase (NasdaqGS: TTPH). Eravacycline is a synthetic glycylcycline similar to Tygacil that is active against a variety of drug-resistant bacteria. Tetraphase is developing eravacycline as a potential treatment for intra-abdominal infection and cUTI indications. In April 2015, Tetraphase announced positive topline data from the lead-in portion of the IGNITE-2 Phase III trial in patients with cUTIs, finding that eravacycline had comparable efficacy to levofloxacin. Tetraphase has also completed the IGNITE-1 Phase III trial in patients with intra-abdominal infections and found that eravacycline was non-inferior to ertapenem.83 Assuming positive results in these two Phase III trials, the company plans to file an NDA by the end of 2015. However, twice daily dosing and a nausea and vomiting profile potentially similar to Tygacil may limit eravacycline's broad uptake. Finafloxacin – MerLion Pharmaceuticals (Private). Finafloxacin is a Phase III-ready fluoroquinolone that is being developed for the cUTI indication by MerLion Pharma. In January 2015, MerLion announced positive results from a 3 arm Phase II trial to assess the safety, tolerability, and pharmacokinetics of once-daily finafloxacin compared with twice-daily ciprofloxacin in 258 patients with cUTI infections. The company is seeking a partner prior to beginning Phase III development and is currently in discussions with the FDA and EMA regarding trial design. MerLion licensed 83 https://clinicaltrials.gov/ct2/show/NCT01978938
the North American rights to develop and commercialize finafloxacin as a treatment for outer ear infections to Alcon Pharmaceuticals. The FDA approved finafloxacin for this indication in 2014. Relebactam (MK7655) – Merck (NYSE: MRK). Merck's relebactam, formerly known as MK-7655, is a beta lactamase inhibitor that has recently received QIDP and Fast Track designation from the FDA. Relebactam is under evaluation in two ongoing Phase II trials in combination with imipenem/cilastatin in cUTI and cIAI patients. Merck plans to launch a Phase III trial in 2015. Plazomicin – Achaogen (NasdaqGM: AKAO). Achaogen is developing its lead candidate, plazomicin, as a potential treatment for patients with complicated UTIs and other serious infections involving multi-drug resistant gram-negative bacteria. The drug is a next-generation aminoglycoside that has been specifically designed to overcome common resistance mechanisms. The company has a Special Protocol Assessment (SPA) for its Phase III trial and plazomicin has also received QIDP and Fast Track designation from the FDA for the cUTI indication. In 2012, Achaogen announced positive results from a Phase II trial in patients with cUTIs, finding suitable clinical outcomes compared with levofloxacin. Sarecycline: Antibiotic for the Treatment of Acne Sarecycline is a semi-synthetic tetracycline derivative, shown in Figure 12, that was developed by Paratek using the Company's proprietary drug platform. In July 2007, Paratek licensed US rights for sarecycline to Warner Chilcott, which was subsequently acquired by Actavis/Allergan, in exchange for an upfront payment of $4 million, and up to an additional $25 million in regulatory and sales milestone payments, and tiered, low double-digit royalties on net sales. Paratek retained development rights for the rest of the world. Sarecycline has both narrow-spectrum antibacterial and anti-inflammatory activity that compares well to other tetracycline-derived antibiotics. Following positive results in a Phase II trial, Actavis/Allergan initiated a Phase III trial for moderate to severe acne vulgaris in December 2014. Figure 12. Molecular Structure of Sarecycline Source: LifeSci Capital Acne Vulgaris

Acne vulgaris is a common skin condition that occurs most frequently during childhood and young adulthood, affecting about 80% to 85% of all adolescents.84 In an effort to have a universal category standard, acne is classified as mild, moderate, and severe based on the number of inflammatory and non-inflammatory lesions and comedones. 85 Up to 20% of patients experience moderate to severe acne. People affected by acne are prone to long-term scarring on the face, neck, chest, and back, but are often even more strongly impacted by psychological effects that influence quality of life. Causes & Pathogenesis of Acne. Acne typically originates within infected hair follicles through a combination of increased sebaceous gland activity, abnormal keratinization leading to follicular plugging, proliferation of the bacterium P. acnes inside the follicle, and inflammation. Factors such as heredity, stress, and diet may contribute to the severity of acne.86 The overproduction of sebum can result in blockage at the end of the hair follicle opening. This can be due to increased androgen levels. The plugged pores filled with the oily material serve as a substrate for rapid bacterial growth. During the process, P. acnes bacteria can get trapped between layers of sebum leading to rapid colonization. The combined bacterial growth, cell debris, and continual sebum production lead to the development of comedones. If the comedone reaches the pore opening, becoming an open comedone, it oxidizes and turns a dark color, leading to a condition commonly known as a blackhead. Conversely, closed comedones or whiteheads, are protected by a layer of skin, which does not allow for the follicular matter to be dispersed at the skin surface. Studies suggest that P. acnes proliferation can trigger inflammatory cytokine production.87 The inflammatory response can cause lesions that express themselves as papules, pustules, or nodules. Additionally, the body's natural response to attack the bacterial colonization is expressed as inflammation within the follicle. Treatment. Acne is categorized by severity into three groups: mild, moderate, and severe. The course of treatment is determined by severity and lesion assessment, and based on this, targeted treatment is prescribed. Acne treatment can involve topical and oral retinoids, benzoyl peroxide, topical and oral antibiotics, hormonal therapies, or a combination of one or more of these.88 Current recommendations for acne treatment suggest a stepwise process, beginning with hygiene and topical treatments, followed by oral, and other systemic regimens. Acne Market Information Epidemiology. Acne affects approximately 650 million people globally, and about 40-50 million people in the United States. The most prominent age group is adolescents, in which approximately 81-95% of boys and 79-82% of girls are
84 Bruggeman, Holger et al., 2004. The Complete Genome Sequence of Propionibacterium Acnes, a Commensal of Human Skin. Science, 305, pp671-673. 85 Dawson, Annelise L., 2013. Acne vulgaris. British Medical Journal, 346:f2634. 86 Haider, Aamir, MD, PharmD, 2004. Treatment of Acne Vulgaris. Journal of the American Medical Association, 292(6), pp726-735. 87 Kim, J., 2005. Review of the innate immune response in acne vulgaris: activation of Toll-like receptor 2 in acne triggers in-flammatory cytokine responses. Dermatology, 211(3), pp193-198. 88 Dawson, Annelise L., 2013. Acne vulgaris. British Medical Journal, 346:f2634.
affected.89 About 20% of all adolescents suffer from moderate to severe acne.90 Major trends seen in the treatment space include combination therapies, especially as single branded agents are being replaced over time by generic drugs. Market Estimate. The current acne treatment market is worth about $3 billion annually and is expected to grow to almost $5 billion by 2024. Estimates for the overall market size are not as important as understanding that a safe and effective acne treatment has the potential to expand the size of the treatment market by bringing previously underserved patients back to treatment. If good efficacy is combined with a strong safety profile, there is also reason to believe that less severe patients would undergo treatment. The table in Figure 13 details recent annual revenue for some of the top branded acne treatments. The top selling treatment is Valeant's Solodyn, an oral antibiotic that the company acquired as part of its 2012, $2.6 billion acquisition of Medicis. Actavis/Allergan recently announced updated guidance for the market potential of sarecycline, providing a preliminary estimate of peak drug sales in the $250-500 million range. Figure 13. Recent Revenue for Top Branded Acne Drugs Revenues (in millions) Formulation Medicis (Valeant)
Minocycline hydrochloride (oral)
Clindamycin phosphate and benzoyl peroxide
Clindamycin phosphate and tretinoin (gel)
Tretinoin (cream, gel)
Clindamycin phosphate and benzoyl peroxide
Benzaclin
Tazarotene (foam, gel, cream)
Galderma (Nestle)
Adapalene (gel, cream, lotion)
Adapalene and benzoyl peroxide (gel)
Mayne Pharma
Doxycycline (oral)
Source: LifeSci Capital

89 Decker, A. and Graber, E.M., 2012. Over-the-counter Acne Treatments. Journal of Clinical and Aesthetic Dermatology, 5(5), pp32-40. 90 Bhate, K. & Williams, H.C., 2013. Epidemiology of acne vulgaris. British Journal of Dermatology, 168(3), pp474-485. Clinical Program Following Paratek's licensing agreement in July 2007, Actavis/Allergan has assumed full responsibility for the clinical development of sarecycline as a treatment of moderate to severe acne vulgaris. A Phase II trial was successfully completed in 2013 and the company launched two Phase III trials in December 2014. Phase II Trial Warner Chilcott initiated a Phase II trial for sarecycline in July 2012. This trial evaluated 3 doses of sarecycline for treating patients with moderate or severe facial acne vulgaris. While this trial was successfully completed in January 2013, limited data has been publicly released by Actavis. Trial Design. The safety and efficacy of sarecycline was evaluated in a randomized, double-blind, placebo controlled Phase II dose-ranging trial in 285 patients with facial acne vulgaris.91 Male and female patients received 0.75, 1.5, or 3.0 mg/kg of oral sarecycline or placebo once daily for 84 days. The co-primary endpoints were the absolute change in the inflammatory lesion count and the dichotomized investigator's global assessment (IGA) score over 12 weeks. Secondary endpoints included the percent change in inflammatory lesion count, percent change in non-inflammatory lesion count, and absolute change in the non-inflammatory lesion count.Phase III Trials

In December 2014, Actavis/Allergan launched two Phase III trials to evaluate the safety and efficacy of sarecycline as treatment for moderate and severe acne vulgaris, triggering a $4 million milestone payment to Paratek. The company expects to clinically complete both pivotal studies by December 2015. Trial Design. Actavis/Allergan designed these Phase III trials based on industry guidance from the FDA.92 These randomized, double-blind, placebo controlled Phase III trials are evaluating sarecycline in approximately 1,000 patients with facial acne vulgaris per trial.93,94 Subjects receive either 1.5 mg/kg per day of oral sarecycline or placebo. The co-primary endpoints are the absolute change in inflammatory lesion count and investigator global assessment (IGA) success at week 12. The secondary endpoint is the percent change in inflammatory lesion count at 12 weeks. Other Acne Treatments in Development The prevalence of acne and the unsatisfactory efficacy of currently available treatments leave room for innovative treatment alternatives. A common and logical solution undertaken by many pharmaceutical players in this field is to enhance efficacy through double- and triple-combination therapies. This is evident from the number of clinical trials completed and ongoing by major players like Allergan (AGN), Valeant (VRX), which includes its 2012 acquisition Medicis, Nestle subsidiary Galderma, and GlaxoSmithKline (GSK) dermatology division Stiefel, all of which have one
91 https://clinicaltrials.gov/show/NCT01628549 92 Guidance for Industry Acne Vulgaris: Developing Drugs for Treatment Draft Guidance. FDA Center for Drug Evaluation and Research, September 2004. 93 https://clinicaltrials.gov/show/NCT02320149 94 https://clinicaltrials.gov/show/NCT02322866
or more branded drugs on the market. Many products in development are from companies pursuing additional patent coverage through low dose, extended release, and other reformulations of existing drugs. Intellectual Property & Licensing Omadacycline. Paratek has patents for omadacycline that cover the composition of matter, methods of manufacturing, multiple method of use indications, salts, polymorphs, and formulations. The overall composition of matter protection on omadacycline lasts through 2028. This includes composition of matter patent protection until 2023 in the US and 2021 in territories outside of the US, as well as a potential additional 5 years of market exclusivity provided by patent term extension. The GAIN provisions of the Food Safety and Innovation Act provide a concomitant 10 years when added to Hatch Waxman. If approved by the EMA, Paratek expects that omadacycline will qualify for 8 years of data exclusivity and an additional 2 years of marketing exclusivity in the EU. Sarecycline. Paratek has designed sarecycline, a new molecular entity (NME) specifically for the acne indication. The patent portfolio covers compositions of matter, multiple methods of use indications, as well as salts and polymorphs. The US composition of matter patent provides coverage until 2031. The Company has licensed US rights to Actavis/Allergan in exchange for upfront and milestone payments, as well as low high single digit to low double digit tiered royalties. Paratek has retained ex-US rights for sarecycline as a treatment for acne and rosacea. Management Team

Michael F. Bigham Chief Executive Officer Michael F. Bigham was appointed Chief Executive Officer and Chairman of the board of directors of Paratek in June 2014. Mr. Bigham has more than 25 years of senior leadership experience in the biopharmaceutical industry. Since 2003, he has been a Partner at Abingworth LLP, a leading international investment group dedicated to life sciences and healthcare. He currently serves on the boards of Avedro and Secure EDI and has held several directorships, including at Avila Therapeutics (where he was also the founding Chairman and CEO), Magellan Biosciences, Portola Pharmaceuticals, Supernus Pharmaceuticals and Valeritas. Mr. Bigham was formerly Vice Chairman of Corixa Corporation, a publicly traded biotechnology company, and was President and Chief Executive of Coulter Pharmaceuticals, a publicly-traded oncology company, until it merged into Corixa. Previously, he was an early employee at Gilead Sciences where he served in various capacities, including Executive Vice President of Operations and Chief Financial Officer. Before joining Gilead, Mr. Bigham was a Partner at Hambrecht & Quist where he became Co-Head of Healthcare Investment Banking. Mr. Bigham received his B.S. from the University of Virginia and qualified as a C.P.A. before completing his M.B.A. at Stanford University. Evan Loh, MD President & Chief Medical Officer

Evan Loh was elected President of Paratek in June 2014. He was appointed Chief Medical Officer of Paratek in June 2012 and has served on Paratek's board of directors since May 2012, including as Executive Chairman from June 2012 until June 2014. From October 2009 to January 2012, Dr. Loh served as Senior Vice President, Development and
Strategic Operations, Worldwide Research and Development, at Pfizer. While at Pfizer, Dr. Loh's responsibilities included scientific, operational, and strategic drug development oversight for all pre-proof of concept development phase programs, leading R&D strategy and R&D portfolio prioritization. Dr. Loh joined Pfizer from Wyeth Pharmaceuticals, where he was Vice President, Multiple Therapeutic Areas where he was responsible for global strategy and clinical operational deliverables. In his 9 years at Wyeth, he led the successful registration programs for Torisel and Tygacil. He is the 2006 recipient of the Heroes of Chemistry Award from the American Chemical Society for his leadership role at Wyeth in the clinical development of Tygacil. Dr. Loh served as a faculty member at both Harvard Medical School and the University of Pennsylvania School of Medicine. Dr. Loh received his A.B. from Harvard College and his M.D. from Harvard Medical School. He completed his Internal Medicine and Cardiovascular fellowship training at Brigham and Women's Hospital. Mr. Loh is currently a director at N30 Pharma. Adam Woodrow Vice President and Chief Commercial Officer

Adam Woodrow joined Paratek in October 2014 to lead the commercialization of Paratek's product portfolio. From October 2009 until September 2014 Mr. Woodrow worked for Pfizer in various strategic and operational commercial roles. In his time at Pfizer, Mr. Woodrow led the Commercial development group in Pfizer's Specialty Care Business Unit, launching Xeljanz for Rheumatoid Arthritis and Vyndaqel® for the treatment of Transthyretin Familial Amyloid Polyneuropathy (TTR-FAP). In addition Mr. Woodrow led the global strategic marketing teams for a variety of products in fields ranging from rare disease to acute hospital based infections, major products included Enbrel, Zyvox, Tygacil, ReFacto and Benefix. Mr. Woodrow joined Pfizer from Wyeth Pharmaceuticals, where he was Vice President and Global Business Manager for Enbrel leading all commercial aspects of Wyeth's inflammation portfolio. Mr. Woodrow has worked with several non-profit societies and organizations such as the Hemophilia Society, Primary Immune Deficiency Society, the Prostate Cancer Support Association and has served on the board of the New York Chapter of the Arthritis Foundation. Mr. Woodrow has a Bachelor of Science degree in Industrial Chemistry from the University of Wales College of Cardiff. Douglas W. Pagán Chief Financial Officer

Douglas W. Pagán joined Paratek in December 2014 as Chief Financial Officer. He most recently served as Vice President, Finance at Acceleron Pharma Inc., which he joined in 2008. There, he was instrumental in the company's successful IPO as well as multiple rounds of private and public equity and debt financings. Prior to working at Acceleron, Mr. Pagán served in strategic and financial management roles at Biogen Idec and Bristol-Myers Squibb. Previously, Mr. Pagán worked in healthcare investment banking at J.P. Morgan, as well as in pharmaceutical operational roles at Johnson and Johnson. Mr. Pagán received his BSE in Chemical Engineering from Princeton University and his MBA from Columbia Business School. Sean Johnston, PhD Vice President of Operations

Sean Johnston has over 30 years of experience in the pharmaceutical industry focusing on process development, manufacturing and operations. He began his career as a Process Manager for Bristol Myers-Squibb. Prior to joining Paratek, Dr. Johnston served as the Senior Vice President of Operations for Genaera Corporation. At Genaera and other start-up organizations he managed development, manufacturing and analytical activities associated with a range
of drug product candidates, including small molecules and biologics in multiple product formulations. He has made regulatory submissions in the US, Canada and Europe, and has hosted pre-approval inspections and general inspections by the FDA and other regulatory authorities. Dr. Johnston has also worked with pharmaceutical contract manufacturers, including Lonza and Siegfried Chemicals, where he was responsible for all aspects of commercial and clinical manufacturing, process improvement, technology transfer and facilities expansion. Dr. Johnston received his M.B.A. and Ph.D. from the National University of Ireland. Susan Perkins, JD Vice President, Intellectual Property

Prior to joining Paratek, Ms. Perkins has been sole in-house patent counsel for multiple start-up biotechnology companies, managing portfolios for clinical stage and preclinical drug candidates while building platform technology IP. Most recently, Ms. Perkins was Head of Intellectual Property at Aileron Therapeutics, a leader in Stapled Peptide therapeutics. Prior to that she led IP at Avila Therapeutics (acquired by Celgene), Syntonix Pharmaceuticals (acquired by Biogen Idec) and Leukosite (acquired by Millennium Pharmaceuticals for which Ms. Perkins continued as patent counsel). Before going in-house, Ms. Perkins was associated with the law firm of Campbell & Flores in San Diego, CA. She began as a Patent Examiner with the US Patent & Trademark Office. She holds a J.D. with Honors from the George Washington University, which included an externship with the Honorable Randall Radar of the US Court of Appeals for the Federal Circuit. Ms. Perkins holds an advanced degree in chemistry from the University of North Carolina, and graduated Summa Cum Laude from UMass-Amherst. S. Ken Tanaka, PhD Vice President, Research & Development

Dr. Tanaka has been Vice-President, Research and Development at Paratek since 2001 and led the discovery teams that identified omadacycline, saracycline, and several preclinical development candidates in infectious disease and non-infectious disease applications. After completing his clinical microbiology postdoctoral training at the University of Washington, Dr. Tanaka joined ER Squibb and Sons in 1981 and has been with small and large pharmaceutical companies, including Schwarz Pharma, Abbott Laboratories, and Pathogenesis where he was involved in antibiotic and delivery system discovery and characterization, participated in clinical development and regulatory affairs, and marketing efforts for drugs including Tobi® and Biaxin®. Dr. Tanaka received his Ph.D. in Microbiology from Northwestern University in 1978 following his B.S. in Microbiology from the University of Washington in 1974. Evan Tzanis Vice President, Clinical Development

Evan Tzanis joined Paratek in September 2014 as Vice President of Clinical Development to oversee clinical development strategic and operational deliverables including the design/oversight of clinical trials, biometrics and regulatory affairs. Mr. Tzanis brings over 20 years of global drug development experience in all aspects of clinical, operational, and regulatory processes. Prior to joining Paratek, Mr. Tzanis served as Head of Clinical Operations and Biometrics at Endo Pharmaceuticals where he also had leadership responsibility in clinical and project management. During his tenure with Endo, Mr. Tzanis was responsible for a number of late stage development programs, including BEMA® Buprenorphine, which successfully completed Phase III. Prior to joining Endo, Mr. Tzanis was the Global Clinical Program Leader at Wyeth and Pfizer for a number of successful new products on the market today to treat a
range of CNS disorders including panic disorder, major depressive disorder, sleep and other medical conditions, including, opioid induced constipation, and rheumatoid arthritis. Risk to an Investment

We consider an investment in Paratek to be a high-risk investment. Paratek is a clinical-stage company with no history of commercializing a product. There are many antibiotics already available and multiple late-stage programs targeting the same indications that the Company is targeting with its development programs. While Paratek has generated positive Phase II data suggestive that omadacycline is a potent antibiotic with broad spectrum activity and a favorable safety profile, these positive results will not necessarily translate into late-stage success or FDA approval. Even if approved, the Company's products may not achieve expected levels of sales. The Company may need to raise funds to support its programs, which could be dilutive to current shareholders. Analyst CertificationThe research analyst denoted by an "AC" on the cover of this report certifies (or, where multiple research analysts are primarily responsible
for this report, the research analyst denoted by an "AC" on the cover or within the document individually certifies), with respect to each
security or subject company that the research analyst covers in this research, that: (1) all of the views expressed in this report accurately
reflect his or her personal views about any and all of the subject securities or subject companies, and (2) no part of any of the research
analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research
analyst(s) in this report.DISCLOSURESThis research contains the views, opinions and recommendations of LifeSci Capital, LLC ("LSC") research analysts. LSC (or an affiliate)
has received compensation from the subject company for producing this research report. Additionally, LSC expects to receive or intends
to seek compensation for investment banking services from the subject company in the next three months. LSC (or an affiliate) has also
provided non-investment banking securities-related services, non-securities services, and other products or services other than investment
banking services to the subject company and received compensation for such services within the past 12 months. LSC does not make
a market in the securities of the subject company.
Neither the research analyst(s), a member of the research analyst's household, nor any individual directly involved in the preparation of
this report, has a financial interest in the securities of the subject company. Neither LSC nor any of its affiliates beneficially own 1% or
more of any class of common equity securities of the subject company.
LSC is a member of FINRA and SIPC. Information has been obtained from sources believed to be reliable but LSC or its affiliates (LifeSci
Advisors, LLC) do not warrant its completeness or accuracy except with respect to any disclosures relative to LSC and/or its affiliates and
the analyst's involvement with the company that is the subject of the research. Any pricing is as of the close of market for the securities
discussed, unless otherwise stated. Opinions and estimates constitute LSC's judgment as of the date of this report and are subject to change
without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase
or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances,
objectives, or needs and are not intended as recommendations of particular securities, companies, financial instruments or strategies to
particular clients. The recipient of this report must make his/her/its own independent decisions regarding any securities or financial
instruments mentioned herein. Periodic updates may be provided on companies/industries based on company specific developments or
announcements, market conditions or any other publicly available information. Additional information is available upon request.
No part of this report may be reproduced in any form without the express written permission of LSC. Copyright 2015.